Good evening, ladies and gentlemen. A very warm welcome to ICICI Lombard General Insurance Company Limited's Q4 and FY 2022 Earnings Conference Call. From the senior management we have with us today Mr. Bhargav Dasgupta, MD and CEO of the company, Mr. Gopal Balachandran, CFO and CRO, Mr. Sanjeev Mantri, Executive Director, Retail, and Mr. Alok Agarwal, Executive Director Wholesale. Please note that any statements, comments, are made in today's call that may look like forward-looking statements are based on information presently available to the management and do not constitute an indication of any future performance as future involve risks and uncertainties which could cause results to differ materially from the current views being expressed. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. I now hand the conference over to Mr. Bhargav Dasgupta, MD and CEO, ICICI Lombard General Insurance Company Limited. Thank you, and over to you, sir.
Thank you, Nirav. Good evening to each one of you, and thank you for joining the Earnings Conference call of ICICI Lombard General Insurance Company Limited for Q4 FY 2022 and for the Full Year 2022. I will give you a brief overview of the industry trends and developments that we have witnessed in the last few months. Post this, our CFO, Mr. Gopal Balachandran, will share the financial performance of the company for the quarter and the year ended March 31, 2022. The industry registered a GDPI growth of 11.1% for FY 2022. As per public disclosures, the combined ratio of the industry was 119.2% for nine months FY 2022, as compared to 110.4% for nine months FY 2021.
The industry reported a loss of INR 4.05 billion as against profit after tax of INR 55.6 billion for nine months FY 2021-2022. Further, the overall combined ratio for the private multi-line general insurance was 112 in nine months FY 2022, as compared to 104.6 in nine months FY 2020-21. The industry's solvency at nine months FY 2022 was worsened to 1.71 x as against 2.07x at nine months of FY 2021. Moving to the quarter under review, the industry delivered a mixed performance. As per the data published by SIAM, the new vehicle sales witnessed tepid growth of Private car segment on the back of supply chain challenges.
The Two-wheeler segment remained far from recovery, while the Commercial vehicle segment has shown growth supported by online demand. Health insurance, on the other hand, contributed significantly to the overall industry growth in line with the expectation and is now the largest contributing segment to the GDPI of the industry. The commercial line witnessed robust growth in sync with current market environment. Coming to the business impact for us, the company has grown in line with the market growth of 12.7%. This is excluding crop and mark-to-market, as against the lower growth that we witnessed till nine months of FY 2022. Within the quarter, the growth momentum has increased each month, and the company has significantly outgrown the market in the month of March 2022.
Coming to the growth of Key segments during the quarter, for motor, the company has grown faster than the industry, and we have now attained market leadership in this segment for the year. Our investment in the retail health side has started to show results and has resulted in our agency channel premium growth of 29.5% for the quarter. As indicated in our previous calls, of the 1,000 retail health agency managers to be added to our employee base, we have now onboarded 750 of them during this fiscal, and the balance 250 offers have been made. We expect the growth to accelerate in the next few quarters as the sales force starts getting productive. The corporate agency channel, including bank insurance, is back in the black with overall growth of 19.4%.
Within this ICICI Bank distribution grew by 24.9%, primarily driven by health indemnity, SME and motor business. Other distribution partners acquired through the integration grew 15.9% during the same period. Our business sourced through our website grew by 20%. Within this, our health business grew by 23%, travel grew by 130% and motor grew by 10%. Business sourced through strategic alliance partners in the digital ecosystem grew by 98.2%. Overall, our digital solutions has enabled us to increase our digital revenues by up to INR 7.74 billion for the current year, which accounts to 4.3% of our overall GDPI. As to the commercial lines are concerned, we experienced robust growth driven by 17.8% growth in the SME segment.
Let me now give you an update on some of our other key initiatives. On the integration, I am very happy to share that as we speak, ICICI Lombard stands as the second-largest non-life insurer in India. Exactly as envisioned while evaluating the team as a potential transaction, the integration enabled us to strengthen our market leadership, augment and further strengthen our diverse distribution channels. The revenue and operational synergies, synergy plans are on track, and Gopal will talk about this in detail in his segment.
Our IL TakeCare app has surpassed 1.3 million downloads with successful submission of over 1.3 lakh claims and over 70,000 teleconsultation requests. The recently added feature, Face Scan, helps users to keep a track of vitals such as blood pressure, heart rate, respiration rate, et cetera, all without any additional devices and from the comfort and safety of one's home. IL TakeCare is built to be user-friendly and a continuous engagement platform, which is increasing our ability to cross-sell. We are also pleased to share with you that we are the first large insurer to move our entire core systems onto the cloud this year. In our data center, we had about 100 applications across 600 servers and around 1,000 TB of data.
Moving our complete setup onto cloud has given us some immediate benefits, including stability, availability and scalability. Some of the investments that we have made during the year in distribution and technology is bearing fruit, and we expect to see momentum and growth as we head into the next financial year. We intend to continue with our expansion across distribution, digital, technology and claim services. Towards this, we have planned additional investments in the range of INR 1 billion-INR 1.5 billion during the coming year. I will now request Gopal to take you through the financial numbers for the recently concluded quarter.
Thanks, Bhargav , and good evening to each one of you. I will now give you a brief overview of the financial performance of the company for quarter four and FY 2022. We have put up the results presentation on our website. You can access it as we walk you through the performance numbers. The effect of the merger the financials have been incorporated in the form of opening net worth as on April 1, 2021. Further, the financials for the current year represent numbers of the merged entity, and the comparative numbers for the previous year in the financials pertain to standalone ICICI Lombard, and hence are not comparable. The company has enhanced disclosure requirement of reserving triangles by giving separate reserving triangles for motor third party and non-motor third party lines of businesses.
This is in accordance with the regulatory guidelines on public disclosures, which is applicable to all the players in the market. You may refer to slide number 29 and 30 of the investor presentation on the reserving triangle disclosures. Our gross direct premium income of the company was at INR 179.77 billion in FY 2022, as against INR 140.03 billion in FY 2021. The industry reported a double-digit growth of 11.1% on a lower base for a similar period. Our GDPI growth was primarily driven by growth in preferred segments, given that our approach has always been growing business sustainably. The Fire segment GDPI was INR 27.5 billion in FY 2022, as against INR 21.58 billion in FY 2021.
As indicated in our results presentation, the overall GDPI of our Property and Casualty segment was INR 50.24 billion in FY 2022, as against INR 39.29 billion in FY 2021. On the retail side of business, GDPI of the Motor segment was at INR 82.8 billion in FY 2022, as against INR 70.2 billion in FY 2021. To harness the potential of these segments, we have been expanding our distribution network to increase penetration in Tier 3 and Tier 4 cities. Our agents, which include the point of sale, has increased to 88,539 as on March 31, 2022, from 81,969 as on December 31, 2021.
The advanced premium numbers was INR 33.68 billion as at March 31, 2022, as against INR 34.59 billion as at December 31, 2021. Resultantly, combined ratio was 108.8% in FY 2022, as against 99.8% in FY 2021, and 111% in nine months FY 2022. Combined ratio was 103.2% in quarter four FY 2022, as against 101.8% in quarter four FY 2021, and 104.5% in quarter three FY 2022. Our investment assets rose to INR 387.86 billion at March 31, 2022, from INR 334.54 billion at December 31, 2021.
Our investment leverage net of borrowings was 4.23x at March 31, 2022, compared to 4.23x at December 31, 2021. Investment income was at INR 30 billion in FY 2022, as against INR 21.96 billion in FY 2021. On a quarterly basis, investment income was INR 7.06 billion in quarter 4 FY 2022, as against INR 5.37 billion in quarter 4 FY 2021. Our capital gains was at INR 7.38 billion in FY 2022, as against INR 3.59 billion in FY 2021. Capital gains for quarter 4 FY 2022 was at INR 1.36 billion, as against INR 0.66 billion in quarter 4 FY 2021.
The successful integration of the demerged business of Bharti AXA to the company has led to optimization of our organizational structure, rationalization of offices, efficiencies in claim settlement practices and technology applications. This will result in an annualized synergy benefits of INR 2 billion, of which INR 0.7 billion has been realized in FY 2022. Our profit before tax was INR 16.84 billion in FY 2022, as against INR 19.54 billion in FY 2021. Whereas PBT was INR 4.1 billion in quarter four FY 2022, as against INR 4.5 billion in quarter four FY 2021. As explained above, the company has seen higher growth momentum in Q4 FY 2022, and within that, in the month of March 2022.
Due to the current accounting norms, this results in up-fronting of sourcing costs, whereas the benefit of earned premium will be realized over the policy period. Consequently, profit after tax was INR 12.71 billion in FY 2022, as against INR 14.73 billion in FY 2021. Whereas profit after tax stood at INR 3.13 billion in Q4 FY 2022, as against INR 3.46 billion in Q4 FY 2021.
The board of directors of the company has proposed a final dividend of INR 5 per share for FY 2022. The payment is, however, subject to approval of shareholders in the ensuing annual general meeting of the company. The overall dividend for FY 2022, including the proposed final dividend is INR 9 per share. Return on average equity was 14.7% in FY 2022, as against 21.7% in FY 2021. The return on equity for Q4 FY 2022 was 14% as against 18.8% in Q4 FY 2021. Solvency ratio was at 2.46x at March 31, 2022, as against 2.45x at December 31, 2021, which continued to be higher than the minimum regulatory requirement of 1.5x .
As I conclude, I would like to reiterate that we continue to stay focused on profitable growth, sustainable value creation and safeguarding the interests of policyholders at all times. I would like to thank you all for attending this earnings call, and we will be happy to take any specific questions that you may have. Thank you.
Thank you very much. We'll now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Shreya Shivani from CLSA. Please go ahead.
Hi. Thank you for the opportunity. A couple of questions I had. I'll probably just take two and then get back in the queue. First one is on the TP hike rate that was announced and what is your feedback on how comfortable are you with the kind of hike that the regulator had proposed? And if you can help us get to an idea, in spite of the hike, I think given that the underlying car sales is still weak, if you can help us understand how much proportion of your motor TP book is private cars. That would be the first question. Second is on your, so just looking at your March 2022, the monthly data.
The trend in your motor TP book was quite strong, and it was stronger than the industry for that matter. If you can help us understand that. Lastly, on the loss ratios for fire, it's come down quite dramatically in this quarter. If you can help us understand that. Thanks for the questions.
Thanks, Shivani. Let me give the answer in the same sequence. If you look at the TP rate hike, it's different across different segments, but the long-term TP rates hike is a bit higher. Overall, at a portfolio level for the industry, its weighted average increase comes to roughly about three odd percent plus minus. You know, honestly speaking, given the general inflation that we see, we would have liked to see slightly higher rates in certain categories. In certain categories we are fine with the rate hike that has been given. In aggregate, maybe a little bit higher would have been appropriate is our view on this. When is it expected?
As of now, the understanding is that it will come around May. That's where we are on the TP hike. In terms of the mix, I'll ask Gopal to answer the mix point on the private side.
Sure. As you can see, we have given on the slide the split of OD and TP is roughly about INR 40.68 billion is own damage and about INR 42.12 billion is third party. Within that INR 42.12 billion, private car third party will be about INR 13.49 billion.
Coming back to your question on growth, I think what's happened, as we've been kind of explaining for the last few quarters, is that we took some calibrated call on kind of readjusting our portfolios away from certain Private car segments, given the pricing competition that we saw on the private car and the own damage side. Increasing on the CV side, again, very calibrated, very selective calls based on you know, ground level insights, plus some experimentation that we've been doing for the last year to figure out if some of those books are going to be you know, better risk for us. Now, when in retail, you cut down, you know, the number goes away immediately, but to build up it takes some time.
I think on the commercial side, the growth momentum has now picked up. What we've been kind of indicating is that if you look at our overall portfolio mix, unlike the market, where out of the total motor book, roughly 45% will be commercial vehicles. For us, that was in the teens, maybe, you know, 15%-17%. That, as we've been saying, should go to roughly in the mid-20s. That journey has now started. We will have to see if we can maintain the momentum of growth of March, but clearly the increase in the market share of CV is something that we expect going ahead.
Your last question on fire loss ratios share. Again, I think that's one segment where we keep talking about saying that a quarterly loss ratio may not necessarily be reflective of the underlying outcome of the performance. A better number to look at will be more, I would say, financial year numbers. In fact, within that, I mean, there could be years where because of, let's say, various large losses or catastrophic years, in fact, the loss ratio of that particular Risk segment could get impacted. Hence, quarterly numbers may not necessarily kind of reflect the underlying outcome. Look at more the annual numbers for the fire part of the business.
Got it. Okay. Thank you, sir. That's it.
Thank you. The next question is from the line of Abhishek Saraf from Jefferies. Go ahead.
Yeah, thanks for the opportunity. I just had a few follow-on questions from the earlier question asked. You mentioned that in the CV we are looking at a higher mix in the. What is giving us confidence in terms of because we are maintaining or continuing the loss ratios in that? If you can just give a few more details in the kind of experiments that you have run and means where are we deriving this confidence from? Secondly, if you can help me understand, I believe that we have taken hikes in Motor OD segment.
What would be the average quantum of hike we would have taken, and which kind of Car segment, and is it across the board that we have taken it in the new or basically in the sense that for new cars or is it across the board for new and old cars? I have two more questions after this. We'll just after if you can answer this, I'll follow up. Yeah.
Yeah. Thanks. Thanks, Abhishek. In terms of the,-- I think we've been talking about the way we've handled this. Again, if you reiterate the point, it is not as if we believe the whole CV portfolio is currently turned viable, or sustainable or profitable. If you look at the overall industry mix, CV will be, as I said, between 45%-50%. We are not talking about going anywhere near that number.
Now, what we've been doing for the last three years, again, on various times we've talked about this, is that based on ground level insights, based on some changes that we are seeing both in certain micro segments, certain markets, based on certain usage patterns or accident patterns that are changing in certain states or even some amount of you know the regulatory you know and the compliance standards in some of these markets, we have been identifying some segments that we believe are viable today than what they were in the past.
What we've been doing as a company is that we've been taking small bets to see, you know, writing small amounts of business, reserving at a level where we believe, you know, it is very, very conservative, but allowing the team to write some of those businesses to see what is the experience that we have over the next two-three years. Some of those experiments have proved to be in line with our expectations, so those are areas where we are scaling up businesses. So that's the confidence that we are getting in terms of the segment of business. Now, in terms of--
The approach that we are taking is not just a loss ratio of, you know, you're not looking at loss ratio, you look at the combined ratio in terms of sourcing costs and, loss ratio together. Wherever there is more viability, that's where we are taking those calls. In terms of private cars, the increase is reasonably across the board. There are one or two OEMs which haven't agreed. We are discussing, but most of the areas we've taken price increases.
Thanks for that answer, Bhargav. Just if you can help us understand if you can share the quantum of hikes on an average that we would have taken.
It'll be single-digit ratio. It's not as if we have taken a huge hike. It will be a single-digit hike.
Okay. That’s very helpful. Secondly, I just noticed that in the calamity losses our share of losses have actually gone up in this year. Is it only because of integration with Bharti AXA or is there more to it? If you can help me understand, is our share of premium also have gone up proportionately in line with the losses as well?
This is largely the Cyclone Tauktae that you're talking about. I mean, if you look at the last 10, 12 CATs, our share of loss has been significantly lower than our normal market share. In Tauktae we had two of our corporate exposures that got hit, so it was kind of a, you know, unfortunate concentrated event, not as if there was a large impact across board. That's why we have an impact only in Tauktae because in, you know, in those cases we are in the western market where we have a slightly higher share than our natural market share. When you look at, you know, let's say, loss share that we got related to the market share in these markets, they get lower.
Sure. Thank you, Bhargav. That's very helpful. Thanks a lot.
Thank you. The next question is from the line of Madhukar Ladha from Elara Capital. Please go ahead.
Hello, am I audible?
Yeah, Madhukar. Go ahead.
Yeah, thanks for the opportunity. Sir, you know, your OD loss ratios for OD and TP, and especially TP actually for Q4 have risen quite materially. If you look at the quarter- by- quarter trend, there is quite a bit of volatility. Now, you know, when we look into the future, how should we be thinking about it? Should we be thinking more in terms of, you know, exit rate will be more appropriate for next year or the full year rate as a base? How do you sort of project these things or how do you look at it?
Madhukar, if you look at the Motor own damage segment, I think to my mind, when you look at what the exit rates for FY quarter four is, will be largely reflective of the trend line that one could potentially see so far as the way forward is concerned. The reason why we are saying is
In line with what we had discussed even in our earlier calls, the thought process is to try and see how we can get significantly into writing businesses which will be relatively driven insofar as more on, let's say, high loss ratios and relatively lower cost of sourcing-led businesses. That's the thought process that we have in terms of increasingly building the book. That's the reason why I would say quarter four on the motor own damage is largely reflective of what one could experience, at least insofar as the trend line for the future is concerned. Having said that, obviously we continue to kind of micro-segment the portfolio to see which are the segments which we want to reselect and underwrite in terms of building the overall book.
The thought process is in line with, as I said, build a book which is relatively, high LR and low expense i nsofa r as cost of sourcing is concerned. On the third- party portfolio, I think the full year numbers are largely representative of what one could experience insofar as the way forward is concerned. Quarter four specifically, I think in line with what we had done in quarter four of last year. If you recollect, I think there were those Supreme Court judgments which had come through.
Yes.
This is where we had to kind of revisit all the outstanding cases that we had as of the previous year, and we had to kind of strengthen the reserving requirements, assuming the fact that we could expect an increase in average claim payout consequent to those judgments on the outstanding cases as well. On similar lines, I think what we have experienced over the last couple of years, which is for understandable reasons that the courts in India, which is predominantly where you get bulk of the motor third party orders being received, that has not been functioning at full force. While we have started to see, particularly maybe quarter four, we have already seen things coming back.
At least over the last, I would say, three-six quarters, the courts have not necessarily been functioning at full swing. What this does is obviously it kind of starts to have an impact insofar as the trend line of settlements or closures of cases of third party that we would have done relative to the historical past. Which would mean obviously, given the fact that there has been some lag insofar as the extent of closures that we would have normally seen, which could happen in the future period, we obviously have to kind of factor in or maybe build in an element of further inflation assumption as a part of our reserving book. Particularly the element of interest that we'll have to add insofar as our reserving are concerned.
Hence, the trend line for Q4 on the third- party book will be more representative of what one could expect so far as future trend line is concerned. That's what I would--
Q4 even for TP is what?
The other thing I think one should also be mindful of, Madhukar, is, I think, given the fact that we have also strengthened the reserving book of the motor third- party pool, as you would have seen in terms of the enhanced disclosures. This element of increased interest or inflation that we'll have to build in as a part of the reserve has obviously led insofar as the erstwhile motor TP pool book is concerned, we have obviously strengthened the reserve. However, on an aggregate basis, we have motor third party, which is actually reflecting a small amount of reserve releases.
Got it. Also then.
Just to add to what Madhukar said, so effectively what we are looking at is the combined rather than just the loss ratio when we are selecting business. The attempt is to bring the combined more under control, not just look at the loss ratio.
Right. I'm guessing the competitive intensity is driving us in this direction. That's why we are seeing, you know, slightly probably lower commission ratios and expense ratios in 4Q. Would that be right to say? What would be, like, the trend for FY 2023?
More than the competitive intensity is overall driving up the overall combined for motor. If you look at from a pure ROE perspective, businesses which are high LR but low expense ratio are better businesses because the expense is upfront, LR comes over the period.
Right. Our expectation on how the integration with Bharti and what should be our expense ratios and what sort of expense ratios should we expect in FY 2023, 2024? Like any guidance on that?
In terms of synergy numbers, Gopal has explained.
Very difficult to put out a number, Madhukar, because I think on the one side, as we have put out what is, what will be the annualized synergy numbers, which we put out as a part of the opening remarks, which is rough.
I missed that. I think I missed that. Sorry. Yeah.
Having said that, I think what we will continue to do when we look at, let's say, FY 2023 or maybe the year thereafter, we would want to continue to kind of stay invested in building some of our expansion plans, particularly what we have spoken about on, let's say, on the health agency distribution side. We want to continue to stay invested on building our digital opportunities that we see, including the investments in technology and claim service. To some extent, I think largely what we would end up is obviously we are pretty much on track in order to kind of realize the benefits of synergy.
At the same time, we would want to kind of use some of this to kind of increase the opportunity that we see on account of the renewed growth momentum that we have seen for ourselves. If you remember what we had discussed when we did the transaction, we had said that for a couple of years our combined ratio will be aggregated and then it will start coming down. If you see our combined ratio for this quarter, it's related to the last two quarters, it's already trending down. That is an ongoing effort that we will make to keep the combined ratio under control.
Now, we also said that, as a strategy, rather than bringing combined down to 100 and delivering a 20% ROE, we want to keep on investing and grow the book a bit faster. Consequently, the ROE may have come down to the high teens. Recently, a clear improvement in combined, that should continue.
Understood. Final question, I was reading the notes to accounts. There is a INR 65 crore payment of GST under protest and an additional agreement to pay INR 40 crores. Can you explain that, and you know, what is this the result of and yeah, the implication of same?
Yeah. These are a couple of matters that is what we have put out, as a part of that disclosure on the notes to accounts. As an insurance company, we are entitled to claim input credit insofar as settlement of motor claims related expenses are concerned, both with respect to the arrangement that we have either on a cashless or on a reimbursement basis. Insofar as the GST department is concerned, I think they seem to kind of allege that possibly we are not entitled to claim certain inputs with respect to some of those motor claim- related expenses. That's one.
The second aspect is again with respect to realization, as a part of claim settlement, again, in the context of motor portfolio, we do kind of end up having certain element of salvages. The view of the department is that on that particular amount of salvage amount that we end up realizing, there should be an element of GST applicability on the extent of realizations that we have made. We have consulted the expert opinions as well as senior counsels on this in terms of the stand that the company has taken, both with respect to the eligibility of input credit on motor claims, as well as whether there will be any element of applicability of GST insofar as salvage related realizations are concerned.
The stand of the company is pretty much well-founded and it is legally correct. At this point of time, obviously that's the reason why the amount of INR 65 crore is paid under protest and another INR 40 crore is something that we are committed to pay. At appropriate point of time in due course, we will be filing for a refund for getting these amounts back. At this point of time, these amounts are largely kind of paid under protest. What we clearly understand is obviously this is something which is applicable more at an industry level, and hence to that extent, collectively, the stand of the industry is something that we will work with and ensure that we are able to get the rightful amount that is due back to us.
Understood. This is an industry phenomenon. The tax department is.
Absolutely. This is not specific to ICICI Lombard. This both the issues are at an industry level applicable to almost all the players in the market.
Got it. Thanks. That's very helpful.
Thank you very much. A request to all the participants, please restrict to two questions per participant. If time permit, please come back in the question queue for a follow-up question. The next question is from the line of Prayesh Jain from Motilal Oswal Financial Services. Please go ahead.
Yeah. Hi, good evening, everyone. Firstly, could you talk about the health claim ratios on the retail side in particular and also in the group health? How have they fared in Q4 and are they back to pre-COVID levels or there are certain elements which are still there with respect to COVID and how do you see this going ahead? I'll ask my second question after that.
If you look at the split of the health loss ratios, which has been given in the aggregate on the presentation deck, the breakup of that in terms of the employer-employee portfolio or let's say the corporate book, that number for quarter three was 93.1%. That number for quarter four is 95.3%. On the retail indemnity book, the loss ratios in quarter three was about 65.7%, and for quarter four that number stands at about 57.6%.
Yes. I think my question was, you know, while it has, you know, the retail definitely has come up, and so this is more of a normalized level now and we can presume it to be in a similar trajectory going ahead, right?
When you look at, for example, on the corporate, or let's say the employer-employee book, we have always spoken about saying that, it typically, particularly the large corporate tends to kind of operate at a loss ratio, which could be ranging anywhere between 95%-100%, anywhere between that. Insofar as the relatively small and mid corporate book is concerned, they generally tend to kind of operate on again, the employer-employee part at anywhere between 90%-95%, which is where on a blended basis, I think one generally gets to see the loss ratios which are relatively around that 95% threshold. However, the cost of acquisition with respect to these businesses, particularly the large corporate, tends to be more direct and hence to that extent on an aggregate basis on a combined ratio book, it becomes viable for us to underwrite.
Having said that, I think over the last three quarters, we have been kind of talking through, particularly on the employer-employee book. Given the fact that we have seen particularly this year the impact of COVID losses playing out, we have been effecting clearly price increases insofar as the renewal of the portfolio is concerned.
While we had indicated a price increase in the range of 15%-20% during our quarter one earnings call, but subsequently, as and when the actual renewals have happened, we have been able to achieve realizations which have been slightly higher than that. Even with the increased price realization, we have been able to clearly hold on to in fact more than 90% of the renewals insofar as the employer-employee or let's say the corporate book is concerned. On the retail side, again, the thought process is pretty much similar. We continue to keep looking at the portfolio outcome in terms of what is the desired loss ratio of the book.
In general, I think particularly on the indemnity book, I mean, depending on the kind of book that you write, the loss ratios could range anywhere between, I would say, 60%-70% on a steady state, whereas the relative cost of acquisition in the initial period could tend to be relatively higher given the investments that we are making on building distribution. So that's what I would say insofar as steady state loss experiences are concerned, both on the corporate health or let's say the retail indemnity book.
Thanks. The second question is more broad level and a slightly longer term as well. If you look at, you know, the efforts that, you know, players like you all have taken with regards to, you know, tech-enabled claim settlement processes on the health side or on the motor side, there have been several initiatives that have been taken. Do you see that the benefits of these efforts will get more reflected in the pricing coming down, or it will translate into more combined ratio improvement? What will be the strategy that ICICI Lombard will be adopting in order to, you know, to take benefits of these measures?
In terms of our long-term thought process, what you're talking about is definitely correct, but it's only one element of what we are, how we are building this. If you look at, for example, on our claims, you know, on the health side, we have launched the AI-driven authorization, you know, the ML engine for settling claims for corporates. That's currently running at a shade lower than 60%. We believe that number will keep increasing as we go along. The approach is across multiple levels. If you think about it, you know, the entire approach with IL TakeCare was to look at an engagement and, you know, a continuum of care approach with corporates.
We believe there are multiple advantages of that beyond cross-sell, up-sell engagement, renewals, et cetera. Even at the time of claims, we believe in the longer term we will see some benefits. We are already beginning to see that, on more than 40% of our corporate client claims are coming, even reimbursement cases are coming through that app. What we've seen in the past is when we had moved the entire claim service in-house back in 2008-09, because we run the complete data and do a lot of analytics around it, we were able to control frauds better at that point in time. On top of it, we built a lot of capability, again, using artificial intelligence to identify fraudulent claims better.
Now, as we digitize the entire journey, you know, the ability to run those engines better becomes even, you know, you have the ability to run those engines even better. We are already beginning to see some benefits in terms of fraudulent claims being managed better. Lastly, we believe if we can drive the video consultation, teleconsultation, as a model to even control unnecessary hospitalization, that could be additional benefit. Overall, there is a very comprehensive thought process in terms of using technology to both give better convenience and service to customers and in the process improve our relative loss costs for the health claims.
Thanks. That's very helpful. Thank you.
Thank you. The next question is from the line of Sanketh Godha from Spark Capital Advisors. Please go ahead.
Thank you for the opportunity. The price hike which we have taken in motor OD, which we have said is largely limited to the new business or we have taken price hike in the renewal premium too. Just wanted to check whether it is just limited to cars or even--
New private car, Sanket.
Okay, new private car. I mean, the control of price hike we have taken, will it help in improving the loss ratios which we are currently witnessing 22% and 73% in four quarters? Expected improvement in the loss ratio because of this current price hike.
We will have to see a few things. You know, one of the things that we are watching very closely is the claim inflation because the input costs are going up for everyone. There is a risk that there would be a claim inflation, though till now in spite of the inflation, the team has managed it really well in terms of controlling the ACS in average claim size inflation. We are also you know, driving a lot of our non-OEM sourced policies through our PPN network. That number has really gone up this year. You know, we are trying multiple strategies to prevent that from going up. Fact of the matter is that we've seen significant increase in input costs. There is a risk that there would be an inflation because of that.
If that happens, then we may not be able to see that, you know, benefit. Our sense is that at this point in time, where the private car only loss ratios are, it needs a price increase ipso facto, I mean, whether we factor in the inflation or not. It is so difficult to predict whether we'll see improvement in loss ratio. If the ACS inflation doesn't happen, the answer is yes, but we would have to guard against that.
Is this an industry phenomenon, the price hike you are seeing across the peers to happen? Or, I mean, the reason I'm asking is that there is a potential risk for our market share loss if we are the only guys who have taken price hike?
We don't think so because, you know, if you see the market share, the recalibration that we had to do, we effectively are down this year. If this year, OD market share this year has gone down largely for that reason, right? Because we felt that the pricing was not adequate. Where we are focusing on the effort that we are building in terms of our digital and agency channels, you know, maybe some of the slightly older segment, we remain reasonably confident about holding onto our market share and OD side. Something that we've been saying that, you know, these two years have been unusual because, you know, people have benefited from lockdowns and different times on the motor portfolio, right?
Yeah .
Traditionally, whenever we see pricing aggression, it lasts for 12, 18 months and then things, you know, correct back. We were talking about a pricing correction, requirement even before the, pandemic, right? So market was, in our opinion, ready for that and then because of pandemic there was people felt no need because of frequency loss, you know, came down. We believe the market will have to rebalance and correct this year and we are seeing that trends. We are seeing that even with price increase price, correction that we are doing, we are holding onto our market share. You've seen our March numbers, and the trend line remains that way.
Got it. Got it. Just based on the TP business, you said that mid-teens of contribution of CV to the entire TP business will reach to mid 20. Just wondering that have you identified a particular product segment where you can increase the tech market or contribution to 10%, whether is it like GCVs or auto rickshaws or these are the segments which you have identified which will drive this increase in the contribution and so the loss ratios?
Yeah. It's not at that, it's not just at that level of segmentation. It's significantly more granular, which obviously I don't want to get into, but we've looked at down to RTO level, you know, parameters to take those calls, not just in terms of product. The product category obviously at an overarching level. We've done a lot more deep analysis on the ground in terms of various factors beyond categories. On that basis, we've taken this call. If you see our market share, it's not a 10% shift that we're talking about. As we speak, the Q3 number has already come to close to 20%. We are talking about that number going to mid-teens, mid-twenties, you know, is not that big a stretch.
As I said, you know, when we started doing those experiments about three years back, and we've watched the data for the last three years, almost 85% of the experiments have worked out well for us. That's where we are kind of expanding. Yes, a lot more micro segmentation than those, just the type of vehicle that we are talking about.
Thank you. Sorry to interrupt you, sir. Request you to come back in the question queue. A request to all the participants. Please restrict to two questions per participant. If time permits, please come back in the question queue for a follow-up question. The next question is from the line of Neeraj Toshniwal from UBS Securities. Please go ahead.
Yeah. Hi. Wanted to understand what is the aggregate level hike on the motor TP portfolio with the change in mix towards CV at 20s%, mid-20s%.
Could you repeat please. There's an echo. We can't understand what you're saying, Neeraj.
The motor TP hike on aggregate level.
Motor TP hike?
Yeah, on aggregate level for us.
At a portfolio level, roughly about 3%, Neeraj.
Okay. With current--
Sir, sorry to interrupt you, but your voice is not coming very clear. May I request you to speak through the handset?
Sure. Is it better?
Yes.
Yeah.
How much impact will the change in mix within the motor TP with higher CV with that margin? Will it be different or with the pockets you have identified? I mean, we have grown substantially higher in the March in motor TP. So then wanted to get more sense how more sustainable it is and what kind of run rate we can expect going forward with the hike and with the increasing losses. So that would be kind of, you know, multiplying each other might be. But what incremental gain we can get through?
You know, not sure about your question, Neeraj. Still not clear. If you're asking because of the TP price hike and the run rate of growth that we've seen in March, if it's linked. If you look at the increases that is being proposed, we have to wait for the final increases. The increases for the long-term TP policy is a bit higher. There our new business should benefit. The approach on the CV business is what we explained earlier, that we are picking up segments on a combined ratio basis. Maybe the expense ratio is a bit low, but the loss ratio could be a bit high. In aggregate, our combined ratio is what we are focusing on in terms of building in a more disciplined manner.
Got it. One more question on motor OD. I mean, you obviously explained, but I wanted more color on how you are looking if, let's say, price intensity doesn't go down. How are we thinking about any other strategy in mind?
As I said, we think it should because as I was explaining, normally we've seen over the last, you know, since digitalization, we've seen these episodic, you know, aggression in the Private Car and OD segment. It does not sustain beyond, you know, 18 months, 24 months. This time it's been close to, you know, 3.5 years. Two of those years have been pandemic. We believe it was also driven by the fact that during pandemic people saved on claims cost. If you look at the industry, we don't believe people can sustain these kind of pricing aggression for too long. We'll have to see. As I said, you know, when we are doing price increases, we are sensing that the market is also, you know, expecting something like this.
Okay. On the last question on the retail indemnity with the agents onboarding, how much delta we can expect, in terms of growth coming in, and what timeline, if at all?
See, you've seen a delta in the month of March itself. We remain reasonably confident of sustaining that going ahead. In fact, as we explained that, you know, when you hire agency managers, they come on board, it takes about two- three months for them to even build their channels of agents, and then the agents start getting productive. So as of now, we've only hired about 750, the balance 250, you know, are expected to come in. The initial signs in terms of the hiring of agents that they've done, if you look at this month or this quarter, you know, we've had added almost 8,000 agents plus for this quarter. So it's picking up.
The traction is high, so there's no reason to think that this gap in outperformance vis-à-vis the industry should drop off. In fact, we should be able to build momentum. We are actually very optimistic about that channel that we are building. If you see just the last quarter, our agency channel has grown by about 29.5%. I don't see a reason why it should be lower than that for next year.
Thank you. The next question is from the line of Chetan Thacker from ASK Investment Managers. Please go ahead.
Good evening, sir. I have, sir, two questions. One is on the health side. Just wanted to understand how should we view combined over a longer term, both for group and retail put together and the mix that you're targeting. The second would be on the INR 775 crore expense that is there in the shareholder account, which does not pertain to the insurance business. What does that exactly pertain to?
Yeah, let Gopal to explain the second one, then I'll--
Yeah, let me explain the second one, Chetan. I think, it's not that those are expenses not related to the insurance business. That's more a classification requirement in accordance with the regulatory prescription. Just to kind of explain this, I think the regulator has laid down limits for all players in the market to comply with limits on expenses of management for the company as a whole.
For ICICI Lombard, we are in compliance with those limits for at an aggregate level. Having said that, what the regulator has also stipulated is individual limits for some of the sub-segments of businesses within the aggregate portfolio. In case if in any of those sub-segments, if the actual, based on the allocation of expenses that have happened to those individual sub-segments, in case if we exceed, then to that extent from a classification standpoint, those amounts are separately required to be given on the face of the profit and loss statement, which is why you find a large amount being reflected there. Equally, when you possibly see the revenue account statement
There is a counter entry there, which I saw, yes. That is moving from shareholder to policyholder and then moving back.
Shareholder to policyholder, yeah, exactly. It's more a classification requirement that is stipulated in so far as regulatory guidelines is, are concerned. As I said, for ICICI Lombard at an aggregate level, in accordance with the requirement of regulation, we are in compliance with those limits of expenses.
That is helpful.
Coming back to your second question, first question on health. Look, at this stage, you know, Gopal explained the corporate book. It is a high loss ratio business in the nineties, but the cost of sourcing is low. It scales in the, you know, just shade above 100, between 100%-105%. We want to continue to write that business because, you know, that volume also helps us in terms of the network and all the other aspects, plus corporate relationships, plus we are doing a lot of work with the IL TakeCare app with corporates to see what we can do in terms of cross-sell and upsell. That's something that we want to stay invested in, but that's the kind of range that we expect going ahead.
On the retail we are investing, and that's why when I, you know, in my opening remarks, I talked about the overall investment that we are making in distribution and technology. So retail indemnity, the health agency team that we are scaling up, obviously at this point in time is reasonably high combined ratio. Our sense is that, you know, it'll take over a couple of years for us to see that coming in line with our numbers because we want to keep on investing, you know, in that segment for some time, at least for the next couple of years.
Sir, next 5 years out, would 95% combined for health be a number that we can work with? I understand it'll be a build up and then things will scale up. Just wanted a more longer term picture.
You know, I always am very worried about predicting five-year-out numbers because none of us can predict five-year-out numbers. My sense is that of course, the combined would obviously come under much better control. I do not believe that the number can be low 90s that some people articulate. We don't believe that that can sustain in the Indian market. You have to operate at, you know, combined ratios which are maybe closer to 100, not closer to 90.
Got it. That is helpful, sir. Thank you so much for this. All the best.
Thank you. The next question is from the line of Prateek Poddar from Nippon India Mutual Fund. Please go ahead.
Yeah. Sir, just one small clarification. Did I hear you right saying that, you know, you have diluted your ROE aspirations for growth and hence, the journey towards 100% combined ratio might not be something which we will look for?
Yes. What we've been saying is that we would want to invest in some of these segments of business, largely digital and health agency. We have said that while we on the integrated basis, on a pro forma basis, we were at about 104 odd number. If you look at our 2020 pro forma, we had said that we would want to bring it down closer to our normal target number of 100, but we do want to invest a bit in terms of the scaling of these businesses. Towards that, if the ROE comes down below 20, we are okay. It will be in the high teens, may not be 20%.
Sir, is this because of competitive pressures that or it is just some more strategic question or a thought to that? Like, what has changed for you to, you know I remember earlier in our conversations always the focus was on ROE and, you know, not diluting the combined ratios. Looks like there has been some change in this.
Bit of both. Honestly, if you see on the health side, it's more strategic, because of the investment that we. If you remember some of the conversations that we've had, that on the health indemnity side we were building up some of the capabilities, both in the outpatient OPD product and the IL Take Care app. Now that we've done that, we want to scale up the business. That's an, that's a strategic call. The rest, of course, driven by current context in the market. If the market remains very aggressive, then, you know, we don't want to, you know, kind of lose market share beyond a level. If, however, market corrects, you know, there will be an opportunity to bring combined down under, into our, you know, comfort zone.
At this point in time, it's a bit of both. You know, investment both in the agency and also in digital to scale up the business for the future.
Got it. Thanks. Really helpful, sir. Thank you and all the best.
Thank you. The next question is from the line of Hitesh Gulati from Edelweiss Securities. Please go ahead.
Yeah. Thank you for giving me the opportunity. Sir, out of the 88,000 agents that we have mentioned, how many would be selling health for us? Also in continuation with health, ICICI Bank has started selling indemnity. How much of this can we kind of, like, go up? What can be the growth path here? Also, is there any update on HDFC Bank and Axis selling health for us or after Bharti AXA partnership?
Let me take it in the reverse order. In terms of the, you know, the key banker partners that we got through the acquisition, we are very happy with the way those partnerships are developing. As of now, they are primarily focusing on SME and motor products, but I'm sure there'll be opportunity to distribute health in due course. And if you see the growth of that channel, while the aggregate banker partners of Bharti, as we said, has grown at about 15.9%, I think these two partners have grown even faster. We are quite happy with the way that those channels are shaping up. Coming to your question on the bank business.
Look, I think, you know, we've been talking about the fact that we had a base effect because of the decision of the bank not to sell benefit policies for, you know, from Q3 of the previous year, and that had an impact for our this year number for nine months. That we've been saying that, you know, that base effect will play out in this quarter. What the bank has decided to do is rather than selling benefit, they are keen to sell indemnity. We've kind of structured suitable products for the bank, and we've launched it. I don't want to give any guidance on whether the number will go up or not or down because at this point in time, we've just started selling some of these products.
We'll see how it goes along and then we will see what numbers we see. At least the base, the negative base that we had of the benefit book being there the previous year and, you know, that business being stopped this year, that effect has now gone.
Thank you.
Last question on Hitesh on the number of health agents. Within that number will be about 6,000. Okay. Sir, so last quarter we've added about eight-10 thousand agents, so not all of them are obviously health. It's, yeah.
Yeah, we have three separate agency channels. One is motor, one is health, one is SME. Of course, we, you know, we work across the channels and try to cross-sell, but we have dedicated channels for the three segments.
Okay. Just one last, if I can squeeze in. Our advanced premium number for March is lower than December, so that means motor TP growth is more towards CV. Is that understanding correct? Or it is towards renewal premiums?
A combination of both, Hitesh. I think relatively, you're right to some extent, given the fact that, let's say, the contribution of CV in the overall motor growth is also kind of higher in FY 2022 compared to FY 2021. That's obviously one contributor. Having said that, I think equally, if you look at some of the older, as what we had said even at the time when these long-term policy guidelines had come in, we had said it will start to kind of peak maybe after attaining almost about three to between the third and the fourth year, this number of advanced premium will pretty much start to kind of peak. Because you will obviously start to have
The incremental numbers of advance premium will be more reflective of what kind of growth that we have, that we will achieve on the motor portfolio. Which is what we have seen in FY 2021, 2022. This is the year where it's been almost about three years since the time the new long-term guidelines had come. Hence, that's the reason why you see a small dip in so far as the advance premium numbers at 31 March this year.
Plus, you know, the other thing that we've been saying that new vehicle sales, both for private car and two-wheelers, have been quite low. That has also had an impact.
Sure, sir. Thank you. That's it from my side.
Thank you. Next question is from the line of Nidhesh Jain from Investec. Please go ahead.
Thanks for the opportunity, sir. Two questions. Firstly, a lot of InsurTech companies are scaling their costs in fee business. How do we view this business? Do we see it as a threat or opportunity for us? Secondly, in the new vehicle new Private cars segment, have we lost market share at all in that segment? Have we lost market share or gained market share in last one year? Just in the new Private car segment.
Nidhesh, again, second question first. In the nine months we lost market share, that's why our, you know, if you see our motor numbers were quite low in the, you know, relatively lower in the first nine months. This, you know, this quarter we have not lost as much. We've lost a little bit in the private car side, but made up in the two-wheeler and the CV side, for the quarter. Our sense is that even on private car, the recalibration or the portfolio alignment that we wanted to do, given the pricing aggression will be largely behind us. We hope to see, you know, market share even in Private car segment being held up. Coming back to your first question on InsurTech.
Look, you know, at this point in time, we are partnering with almost all of them. In terms of whether in the long term it's positive or negative, you know, there's one positive in terms of them potentially expanding. As of now, they're not expanding the market really because they're more playing like aggregators, aggregating existing agents under their umbrella. We hope that in due course they will expand the market and grow. We are at this point in time working with all of them. On the POS side, we are not with the digital aggregator, but on this segment we are working with them.
Sure, sir. Okay. Thank you very much.
Thank you. The next question is from the line of Nischint Chawathe from Kotak Securities. Please go ahead.
Hi. Am I audible?
Yes.
Yes, Nischint.
Yeah. Hi. My question actually pertains to the last two slides of the presentation. I think what you mentioned there is that, based on the revised disclosures, you have split the reserving, you know, triangle disclosures between motor TP and the others. Now, I think what we can see over here is that the releases in the other segment is higher than motor TP, if I look at it, you know, I mean over the years. So how should one really be reading it? What is the interpretation of it? Is it something that we are reserving a little more conservatively in the other segments or, I mean, if you could just help us interpret this.
Nishant, if you look at, so far as approach to reserving is concerned, fundamentally there is no change, in terms of the process that we follow, for the current year relative to, let's say, what approach we have been following over the last several years. The approach is to kind of, reserve conservatively at source and as and when each of this portfolio kind of starts to develop in terms of loss experiences, you will possibly see whether the reserve estimates that we made at source was adequate or not so adequate. In some of these lines, the conservatism of reserving will start to play out faster. However, in certain long tail lines of businesses, that will obviously take a relatively longer time for you to reflect whether the reserves that we carried at source were adequate or not.
Slide 29 and 30, the point that you made, other than motor third party lines of businesses are predominantly businesses which have a relatively shorter tail in so far as claim settlements is concerned, which is why the play out of the actual loss experience tends to be faster and you are able to kind of see relative to the amount of reserves that we carry, you are able to see, let's say, small amount of reserve releases. However, in so far as the third- party book is concerned, as I said that's a book which is long tail and obviously takes a longer horizon before which one can say whether the amount of reserves that we have kind of built in is appropriate or not.
Having said that, if you look at the information that gets put out, whether it is for motor third party or whether it is for the other lines of businesses other than third party, the information is given for the last 10 years. You can see over the last 10-year cycles, even after 10 years of development, both with respect to the motor third- party triangles that you see, as well as the other than motor third party triangles. Based on the loss development experiences, our approach to reserving has played out to be conservative at source, and both of them reflect small amount of reserve releases in the portfolio.
If I can add to what Gopal said, we are actually very happy that this disclosure has been mandated by the regulator. We've been asking for this disclosure for a long, long time. We are the first company to disclose and now we are seeing more disclosures. It's not just the two, you know, pool and aggregate. There are further disclosures of, now, you know, TP business for the running book, and the non-TP business, which is a very good development.
Perfect. Thank you very much.
Thank you very much. Ladies and gentlemen, we'll take that as the last question. I now hand the conference over to Mr. Bhargav Dasgupta for closing comments.
Thank you. Thank you everyone for joining and, again, you know, if you have any other separate questions, feel free to reach out. We'll be happy to take them separately. Thank you again.
Thank you so much.
Take care and good night.
Thank you very much. On behalf of ICICI Lombard General Insurance Company Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.